Proposed City Capital Budget for 2010 – 2014

It’s that time of year again — budget season. The City’s budget process kicks off with the submission of the City Tax Budget back in July. Using the revenue parameters estimated in the Tax budget the City then proceeds to develop the Capital Improvement budget in August. Here’s a look at the proposed 2010 – 2014 Capital Improvement budget that the staff presented to City Council last week.

The City’s Capital budget is critically important. Capital projects are the most visible and largest investments of tax dollars that we make – so they are figuratively and literally a big deal. All of the projects that make the capital cut are critical to our mission. That being said today’s financial realities have made the capital discussion a lot shorter.

When you look at the City’s Capital budget it’s important to appreciate the value of a multi-year plan that serves as a strategic planning tool but on the same token keep in mind that the only dollars that are really committed are for the next year which in this case is 2010. The out years (2011 thru 2014) of the plan almost always change as we re-contextualize them each year to reflect changing needs and circumstances. For that reason we spend our time with Council discussing 2010 not the out years.

For example, last year in the 2009 Capital budget we showed $5.5 million for the City’s General Fund cash contribution for 2010 but a year later we’ve revised that number down to $2.9 million. That shrinkage is not a coincidence, it reflects our financial limitations and uncertainty. This is not another doom and gloom budget but it is one of enormous constraints. Although we preach against the practice of deferred maintenance we have few options in next year’s budget.

The staff proposed close to 75 Capital projects for 2010 but only 52 of those projects made the most critical list included in the Capital plan and only 35 of those 52 were actually funded in 2010. With all these needs only 2 new projects (at a cost of $70,000) are being proposed for Council approval in 2010. The other 33 projects have already been approved by Council for a total Capital budget of $9.9 million in 2010.

The Capital budget introduction emphasizes the role of the Capital plan as an investment strategy. With $150 million in infrastructure assets we have the dual goals of preservation of equity (maintaining the infrastructure value) and leveraging the existing investment to grow our tax base. By proposing to spend $9.9 million in 2010 we are re-investing or re-capitalizing our infrastructure at a 6% rate.

The Capital budget is not created in a vaccuum — it is rooted in the City’s strategic priorities and principle-based programming. Here’s the strategic priorities and the projects proposed to serve them:

And if you don’t want to wade through all the details here’s a summary snapshot of the proposed 2010 Capital budget:

Proposed 2010 Capital Program Summary

– The proposed 2010 capital program includes 35 projects.
– The total proposed capital program costs (including all debt costs) for 2010 is $9,887,461.
– $6,987,000 of the $9,887,461 (or 71%) is grant and/or debt funded.
– The City has leveraged outside capital for City cash on a 3:1 basis.
– The approved 2008 Capital Plan showed a $5.5 million cash contribution for 2010.
– The proposed new City cash contribution for 2010 is $2,900,461 (a $2,599,539 reduction) .
– The estimated Charter requirement for 2010 is $2,561,489.
– The proposed 2010 City cash contribution is $338,972 above the Charter requirement.
– The proposed 2010 debt (debt service, principle, interest) is $3,295,185 (reduced from $3.6 million in 09).
– The net cost of debt in 2010 will be $570,186.
– The City’s legal debt margin (10.5% of assessed value) is approximately $35 million.
– The undesignated fund balance declined by $240,000 in 2008 to $12.6 million.
– The undesignated fund balance is projected to decline by $2.2 million in 2009 to $10.4 million.
– The undesignated fund balance is projected to decline by $2.3 million in 2010 to $8.04 million.
– The managed reserve fund balance (emergency fund) is projected to be $2.27 million in 2010.
– The staff is proposing a 3% water and 3% sewer rate increase for 2010 (projected to add .75 cents / month to water bill and $1.60/month to sewer for a total of $1.91/month — or $22.94 per year for an average customer)
– The last rate increases were in 2003 for water and 2007 for sewer.

City Council approved all of the projects for 2010 but they have deferred the discussion of the water and sewer rate increases pending more analysis and explanation that is currently planned for October.

The City’s proposed 2010 Capital budget has been uploaded to the Kent360 web site but here are the direct links by budget section: